‘It is somehow ingrained in us that a multinational job is better than a local one’

Multinational Corporations (MNCs) in Bangladesh are outperforming local companies in many respects. For example, From 2015 to 2020, the average sales growth of the MNCs was 9.41%, whereas the local companies had a 6.7% sales growth. Also, in terms of profit, the MNCs' growth was 9.22% against local companies at 1.4%. Mamun Rashid, Managing Director of PwC Bangladesh, in an interview with The Business Standard highlighted the weaknesses of local companies and suggested some measures through which they can catch up to leading global companies. 

Why are MNCs outperforming local companies?

Before I answer the question, I'd just like to point out that the performance of many of our local companies has also improved significantly over the last couple of years. They have become a lot more efficient and technologically advanced in their production and management methods.

Of course, there is still a long way to go to catch up with the leading global companies, but I firmly believe that the gap will reduce substantially in the years to come. If you look at certain Bangladeshi brands, they are doing very well in several countries abroad, in terms of market growth.

MNCs are recognised globally and have strong branding – and that is why everyone perceives MNCs to be of better quality. But you must keep in mind that they did not achieve this feat overnight. Rather, this results from their decades of development and experience, coupled with consistent innovation.

Compared to the length of time MNCs such as Nestle, Procter & Gamble and Unilever have existed, our local companies are almost infants. 

In recent times, Bangladeshis have enjoyed a rise in disposable income and, as a result, have become more willing to spend on better quality products and more renowned brands. 

Naturally, this points towards a rise in preference for well-trusted global brands instead of newer local brands. This is a very common phenomenon in any society that becomes wealthier. Renowned products from MNCs, backed by perceived quality, act as a status symbol for these consumers.

Trust is also a major factor that comes into play during consumer purchases, and generally, most local consumers tend to place a greater trust on internationally well-recognised products. I believe if Bangladeshi brands become more well recognised by providing high quality and durable products, they can also gain the confidence of the local consumers and enjoy higher sales.

Compared to the MNCs, what are the inherent weaknesses of local companies in terms of employee motivation, retention, workplace and administrative systems? 

The greatest inherent weakness of local companies regarding employee management and administration is perhaps the lack of desire in the minds of local employers to constantly improve. 

Many of them don't seem to get the fact that more sophisticated employee management techniques and investment in people's future could benefit the entire company in almost all aspects. 

The current mindset is something along the lines of "if something is working, then why mess with it." The notion of constant improvement in employee management and administration has not yet fully become a part of our local corporate culture.

Local companies are also lagging in technology and innovative systems to track and monitor employee and administrative matters. Again, the MNCs have enjoyed years of experience worldwide and have come to understand the best practices. 

Lastly, the pay scale generally tends to be much better at MNCs than local companies and that is one more reason why MNCs are better able to attract employees. 

Added with this is, of course, employee recognition for a good job and training and personal development opportunities for employees. Diversity in the workplace, zero tolerance for discrimination and career progression across the region or world are also playing a role here.

Some well-known Bangladeshi companies have also become much better at employee management in recent times. This is mainly happening due to these local companies being more open-minded and embracing international standards. 

There is an ongoing culture shift and some companies are perhaps finally starting to realise that there are long-term benefits of proper employee management and keeping employees satisfied. But as you correctly pointed out, there are still some weaknesses in this regard compared to MNCs.

Why are MNCs more attractive than local companies for our workforce? Is it because you are more likely to become a CEO or be posted abroad while working for an MNC while the top brass in local companies are family members?

It is somehow ingrained into our mindset that a job in a multinational company is better than a local one. This mindset has almost become a part of our culture.

Most job seekers feel like they would be treated more fairly at an MNC whereas they would be taken advantage of in a local company. Moreover, as I mentioned before, most multinationals tend to pay better than their local counterparts. 

However, this dynamic is shifting; more Bangladeshi companies are gradually starting to attract talented employees with highly lucrative compensation structures and added benefits. For instance, if you look at many local private commercial banks – they have truly evolved in this area and tend to pay quite well.

Fortunately, in recent times, the age-old concept of allocating top-level positions to family members is also starting to go away as local private companies realise that having real talent is more important than always favouring family links. This is especially true for large conglomerates. 

However, even while I say this, the culture of having family members on the boards of local companies remains highly prevalent, which must stop. Most families are also shy of engaging independent directors with multinational backgrounds, who could go very well with the next generation and young employees. 

While most MNCs seek local talent for their local operations, they also post their employees abroad, and for any employee, this is a lucrative possibility to work for.

What can the local firms learn from the MNCs?

The concept of fairness, equality and promotion based on merit rather than personal connections is a major learning opportunity for local companies from MNCs. However, I would say that in Bangladesh, even in some MNCs, the selection criteria for the highest positions are not always 100% fair and are alleged to be at times based on personal connections as well.

Bangladeshi local firms can also try to recreate the better people management, training, development and incentive structures of the MNCs. MNCs' consistent focus on long-term growth and development strategies instead of a fixation on quick short-term success is something that local companies can also adopt.

How can local companies offset sone of the vost advantages that the MNCs have in terms of accessing resources from global partners?

Local companies may consider focusing on their existing competitive advantages and try to improve them further. For any company, usually, the people are its most important resource. Bangladesh's greatest and most abundant resource is its people and the local companies would certainly benefit from developing and upskilling these people so that they become a lot more efficient and effective. 

A local company is much better situated and positioned to access and utilise the Bangladeshi people than an MNC. This is definitely an inherent advantage.

Another way is to procure as many of the resources required locally rather than from abroad. Bangladesh still heavily relies on overseas materials and supplies, making the process very costly. 

This is true for both MNCs and local companies. However, local companies have stronger personal networks and logistical advantages than MNCs. In my view, this provides them with a massive cost advantage over the MNCs. Increasingly, better supply chain management is also becoming very important.

Despite the success of the MNCs, why are there not more MNCs coming in? 

Various reasons come to my mind when I consider why more MNCs are not coming in. Bangladesh does not have a high rating regarding the ease of doing business. When you couple this with the bureaucratic and regulatory struggles, political interferences and obstructionist practices in terms of day-to-day operations and setting up businesses, this is a natural disincentive for any MNC to set up in Bangladesh.

There are also immense barriers to the repatriation of profits, royalties and other fees, while on the flip side, there is an unfairly high tax burden imposed upon them. Additionally, certain key government agencies have unscrupulous practices.

Most practices to facilitate the establishment in Bangladesh are done manually, leading to every process being lengthy and time-consuming. There is also a sheer lack of proper infrastructure and connectivity, which leads to issues such as massive amounts of traffic on roads.

You also must look at the fact that there is a lack of skilled labour force to support the production line that requires a high level of expertise. This also makes MNCs feel like they would not have the right resources to carry out their operations.

However, despite everything that I've said, there are still plenty of MNCs who are interested in coming to Bangladesh and setting up shop here and are currently in their exploratory or feasibility phase. At the same time, the issues that I have mentioned are starting to get mitigated. This needs to be done much faster and with much greater conviction if we are to see the arrival of more MNCs soon.

Mamun Rashid is a Managing Director with PwC Bangladesh. He spent almost 25 years with three Multinational Banks. Out of his 36 years of professional career, barring a few years in business teaching and entrepreneurship, he has spent more than 32 years with MNCs. He also played a significant role in helping the local companies accept global standards, go abroad, raise financing and improve overall business strategy.